Soft Costs

In construction, there are four divisions of cost: soft costs, hard costs, land, and the contingency reserve. The hard costs refer directly to the cost of construction for supplies and tools.
Soft costs refer to costs that add up from things that cannot be seen, like loans and fees. Soft costs play a huge role in the total cost of the project, so it’s best not to overlook any of them.

When calculating soft costs you must add together:

• architect’s fees
• engineering fees
• appraisal fee
• toxic report fee
• plan check fee
• license and permit fees
• assessments
• sewer and water hook-ups
• loans and interest
• legal fees
• administrative fees
• advertising
• mortgage costs
• equipment rental fees
• labor
• realty taxes

Soft Costs for Small Projects

If you are doing a project by yourself, you still have to worry about soft costs before you get started. Many building projects require you to obtain a building permit, and it is likely that you may have to rent tools while you work. One of your biggest soft costs will probably come from property taxes, which may increase if you have added a valuable asset to your property.